1) 90% of people are poor minded. Poor mindedness is the default state. It’s the natural comfort zone. It’s the animal instinct to find comfort zone and avoid taking risks. That’s human nature. Being poor minded is fine, you simply are parts of the majority people. Don’t feel bad.

Why I say double?

Because in addition to leverage other people money to buy a house, when you rent the house out. Over the long term, you leveraged another asset that you may be very conscious about: Inflation. For asset poor person, including most stock market players with no property assets, inflation is very bad for them. Inflation will make their stock portfolio worth less in the future. However, when holding real estate, inflation becomes a friend because it will be reflected into a gradual rent increase. Eventually, the rent increase is going to be so high that would completely take over as one of the main sources of return. That’s why I say that there are double leverage in any real estate investment. One is obvious, the second is less obvious, but equally powerful.

Here is my take:

Florida and Arizona markets are missing a key ingredient compared to California and East coast metro markets: Jobs and quality of jobs. The boom was basically created by flippers from other states trying to ride the baby boomer retirement wave and sun-belt migration wave. However, a market without solid job base is fragile. Most investors bought in Florida are either rich second home investors, true retirees or greedy flippers. None of them have to buy in Florida. They all have primary homes in industrial north eastern states or western states. Buying in Florida is purely a dispensible move, not a necessity. When the boom is over, a lot of the flippers can’t hold the properties, they must take a loss and exit in mass. Florida’s job number and pay level from these jobs are very poor. Florida is basically a retirement/resort/entertainment focused state. Most jobs there are service oriented, thus pay lower wages.

I invented a 3-year flipping rule a while ago after learning from the lessons in past flipping experience from many people. The key mistakes flippers made is failure to exit in time to avoid the market down turn. A lot of people started to flip in 2003, failed to stop by 2005, then by 2006, they all got bagged in…

Countless flippers are now holding high-priced condos along the coast in Florida, can’t sell them and can’t rent them high enough to cover the mortgage, they are in deep sh*t.

Following 3-year rule can potentially avoid such mishaps.